The Halliburton case in the U.S. Supreme Court is moving quickly, with oral argument scheduled for March 5, 2014. At issue, at least potentially, is the continued viability of the fraud-on-the-market presumption of reliance. The presumption was judicially created by the Court and is routinely invoked in securities class actions to justify the grant of class certification.
The merits brief for the petitioners (Halliburton and its CEO) and the supporting amicus briefs have been filed with the Court. A listing of the briefs can be found here. The author of The 10b-5 Daily – Lyle Roberts of Cooley LLP – assisted the Washington Legal Foundation (WLF) with the filing of an amicus brief that focuses on the second question presented: Whether, in a case where the plaintiff invokes the presumption of reliance to seek class certification, the defendant may rebut the presumption and prevent class certification by introducing evidence that the alleged misrepresentations did not distort the market price of its stock.
The WLF brief argues that price impact is not dispositive as to either materiality or loss causation for all class members and, as a result, allowing a price impact rebuttal at the class certification stage does not run afoul of the Court’s Amgen decision. In addition, the brief points out that allowing a price impact rebuttal would harmonize the Court’s approach to affirmative misstatement and omissions cases and would better protect the rights of individual investors who can demonstrate actual reliance. The WLF brief is available on the Foundation’s website.